UK PM David Cameron had tasked the MAC to review the tier-2 visa system last year as part of his pledge to cut total annual net migration from outside the EU.Neha Alawadhi | ET Bureau | January 28, 2016, 09:39 IST

Even as US visa issues haunt India's technology outsourcing industry, the UK has proposed changes to its skilled-workers visa policy that could increase costs for companies and make transfer of workers more difficult.

The UK is the second-largest market for Indian IT companies and accounts for 18% of their export revenue, amounting to about $19 billion annually, according to National Association of Software and Services Companies (Nasscom).

The UK's Migration Advisory Committee (MAC) has proposed increasing the minimum salary level of IT employees entering the UK for short or long terms to £41,500, according to a report on its website.

It has asked for immigration health surcharge and immigration skills charge to be levied on each employee sent to client sites in the UK, which will have a combined impact of £1,200 per applicant per year.

UK PM David Cameron had tasked the MAC to review the tier-2 visa system last year as part of his pledge to cut total annual net migration from outside the EU. According to the MAC report, it is the "government's ambition to reduce annual net migration to the tens of thousands (from the current level of 336,000)."

Major Indian IT companies, including Tata Consultancy Services, Infosys and Wipro, make use of intra-company transfer visas, which are a part of the UK's tier-2 visas. Nasscom urged UK to reconsider the panel's proposals.

"We are disappointed that companies leveraging Indian talent in information technology domain are singled out in the report. The UK and India enjoy strong trading relationships: the commitment to increase trade was renewed when Prime Minister Modi visited the UK in 2015," Nasscom president R Chandrashekhar said in a statement.

In 2014, tier-2 visas accounted for an inflow of 52,478 people into the UK, according to the MAC report. BackTheMac, a group that campaigns against the use of intra-company transfer (ICT) visas, estimated the number of Indian workers using these permits at 36,762 by December 2014.

The MAC report said Indian IT workers comprise over 90% of migrants using ICT visas. To reduce migration through the tier-2 route, "price should be the main mechanism" and higher costs would likely reduce demand, according to MAC.

"In the medium to long term, the battle will be not about costs, but about getting adequate numbers of technically skilled talent in Western Europe, given the increasing average age of workforce and eroding levels of technical skills," said Sanjoy Sen, a doctoral research scholar at Aston Business School in the UK.

Indian IT firms should focus on providing high-value client solutions, better innovation and make more judicious use of offshore and inshore delivery teams, he added.

The MAC also proposed creating a new category for third party contractors of IT firms. The MAC's proposals are often accepted by UK Home Office.

Chandrashekhar said the report does not present evidence that a rise in costs would cut migration or raise availability of skilled workers in the UK.